Reading the Tea Leaves: Growing Sales & Profits with Tea

1. Reading the Tea Leaves:Growing Sales & Profits with Tea A Panel Discussion & Presentation by: Joe Simrany – Moderator, Tea Assoc. of the USA William Bowron Jr- Red Diamond Inc. Eliot Jordon- Peet’s Coffee & Tea George Vukasin Jr.- Peerless Coffee & Tea

2. Objectives of this Session • Brief update on the State of the Tea Industry • Current consumer trends • Future trends & forecasts • Integrating tea into a coffee environment • Questions from the audience

3. Tea Imports into the USA in 2008 • The USA imported nearly 240 million pounds of tea in 2007 • Full year 2008 figures are just in and indicate over 257 million pounds or nearly 117 million Kg were imported in 2008 • This makes the USA the seventh largest consumer of tea after China, India, Russian Federation, Turkey, Japan, and the United Kingdom

4. Tea Imports – USA Kg(000)

5. Tea Imports into the USA (Kilos)Three Year Rolling Average

6. 1990 $Value by Type Trad. $0.87 Billion RTD 0.20 “ Fd Srv 0.50 “ Special 0.27 Total $1.84 Billion Green $20 Million 2008 $Value by Type Trad. $2.00 Billion RTD 2.95 Fd Srv 1.02 Special 1.16 Total $7.13 Billion Green $1.5 Billion Size of the Tea Market in U.S.

7. Change in Tea Consumption by Revenue & Segment

8. Tea Sales ($) Forecast to Double over Next 5 Years • A reputable market research firm (Packaged Facts) has forecast that the Dollar value of tea in the United States will move from over $7 Billion in 2008 to nearly $15 billion by the end of 2012! • Green Tea is growing at a much higher rate than Black Tea; up over 200% in Kgs. Over the last ten years

9. Traditional Tea Trends • Historically this has been the largest tea segment at $2 billion • Price points have been stagnant for years & typically sell for under $3 per package which is a significant consumer appeal in a tough economy • Tendency has been to smaller packages (under 100 count) to overcome price issue • Packers are beginning to use a health message to sell. • Advertising effort is minimal but increasing

10. Consumer Issues Driving Traditional Tea • Growing number of scientific studies suggesting tea plays a role in the inhibition of many chronic human diseases • Widespread acceptance by the scientific and medical communities that tea is a healthy beverage • Widespread awareness by the media that tea is proven to be a healthy beverage • Tea enjoys positive imagery regarding its contributions to health versus other beverages • Traditional tea pricing is very appealing

11. Developments to Watch • Traditional Tea • Smaller pack sizes • Packaging & process innovation • Health claims • Increased consumer marketing • Blending of traditional tea with specialty tea

12. RTD Tea Trends • RTD within a span of 10 years has gone from virtually nothing to the single largest tea segment • It is responsible for appealing to a much wider audience than traditional tea • Many powerful marketing alliances have been formed with soft drink & water companies • Prospects for future growth are excellent TEA

13. Consumer Issues Driving RTD Tea • RTD tea appeals to the individuality of consumers • RTD teas continue to appeal to the demand for convenience and availability • Other beverage options are seen as being less healthy than tea • Concern with obesity is driving many consumers to tea

14. Developments to Watch • RTD Tea • Continued flavor exploration from existing & new suppliers • Functional teas linked to health • Specialty Tea entries • Marketing directed against bottled water

15. Foodservice Trends • Tea is more difficult to prepare than coffee & is often served incorrectly • Equipment manufacturers are beginning to address the issue by developing faster processing methods • Operators are starting to do a better job with tea because of the profit potential & consumer demand • Some high end restaurants are employing Tea Sommeliers

16. Consumer & Trade Issues Driving Foodservice Tea • High profitability potential attracts entrepreneurs • Increasing preparation options encourages greater foodservice utilization • Trend towards natural foods favors tea in general and organic tea specifically • Emerging Tea “Salons” are making Specialty Tea more available

17. Developments to Watch • Foodservice Tea • Improved preparation & variety • Improved consumer demand driven by concern for health • Resurgence of loose tea • Increased operator merchandising • Greater awareness of profit potential

18. Specialty Tea Trends • Fastest growing segment in the industry • Ten fold increase in the number of tea rooms from 200 to 2400 • Most coffee houses now offering specialty tea • Tremendous profit potential attracting entrepreneurs and stimulating producing country interest

19. Consumer & Trade Issues driving Specialty Tea Trends • Promise of high profitability is drawing thousands of entrepreneurs to sell various forms of tea • The number of tea rooms has grown from 200 to 2200 over the last 10 years in America • Thousands of Coffee Houses have added Specialty Tea • Affordability to consumers

20. Developments to Watch • Specialty Tea • Rapid expansion of tea outlets • Emergence of 1 or 2 National operators • Increased Producing Country involvement in marketing (Tata & Tea Boards) • Greater availability of Estate Teas

21. Prospects for Future Growth • Traditional Tea is expected to realize annual growth in the 2-3% range although a prolonged recession could drive higher growth • RTD Tea will continue to experience robust growth in the range of 5-10% annually • Foodservice Tea will experience annual growth in the low to middle single digits • Long term, Specialty Tea will become the fastest growing segment with annual increases in the 10-20% range

22. Calm-A-Sutra Contest

23. Integrating Tea into a Coffee Environment • Panel Discussion • Questions from the audience • Further information please visit www.teausa.org